A study by the Ethics Resource Centre (2011) recently found that organizations behave differently according to prevailing economic situations or conditions. As economic sentiments get better, misconduct is observed to have risen and whistle blowing activities concerning ethical misconduct is seen to have dropped. Ethical misconduct is also proven to be more prevalent in organizations with mega projects involving huge potential profits and returns.

The past decade has witnessed large and seemingly profitable companies like Enron, MCI and WorldCom severely impacted by illegal accounting practices and public scandals. These events not only damaged the economic generability of the company, they also caused severe depletion of the reserves of the shareholders. The same occurrences were also seen in the Malaysian context. Abdullah (2007) described that in Malaysia; financial irregularities cases made up 50.85% of prosecutions by the securities and capital markets regulator, Securities Commission, between 1999 and 2005. Ethical issues arising within cases like Megan Media, Wimemes Corp, Transmile Group and many others, were among these cases.

Oil and gas capital investment has been one of the most important and largest economic generators, stimulant and creation in the world. This industry involves tremendous wealth and in many countries, associated with power. The oil and gas industry dominates the economy (Johnston, 1994). In 2006 alone, the world capital spending on oil and gas developments exceeded USD 100 billion, which is bigger than most of the third world countries’ annual budget. This is forecasted to increase further in the next few decades (Chuong, 2007). Oil and gas has always been synonymous to mega investment projects. To illustrate, a USD 6 billion project executed in China is referred by ExxonMobil, a world giant oil and gas operator, as “small potatoes” (The Economist, 1998) while other industries may refer to a similar valued project as perhaps as the biggest project of the year. Pradesh (2011) noted that the global outlook for world capital spending on oil and gas developments is forecasted to grow at 12% annually.

Projects of this size and of such significant monetary value naturally pose significant managerial challenges in ensuring that ethical implementation is in place for all the transactions involved. Imagine the financial risk and capital loss exposure involved, where illegal accounting practices, preferential practices in contract awarding, ethical issues within environmental considerations, construction practices and oil spillage to name a few in the Malaysian Oil and Gas Industry?

Background to the Study

The National Business Ethics Survey produced by Ethics Resource Center (2011) has identified that ethical misconduct reports have been on the rise. High number of misconduct report is suggesting that company level ethics programs and training are not being conducted successfully, if any in the first place. The lack of measurability lack of business ethics levels and its improvements may be a signal for Malaysian Oil and Gas organizations to reassess their approach to this challenge, which if not handled successfully, can be detrimental to profits, growth and most importantly, reputation. Potential business partners would shy away from investing in Malaysian Oil and Gas projects if the related organizations have histories of public scandals and ethical misconduct issues.

Ethically bounded culture and practices must be imprinted within conduct of every the employee in the industry before permeating through to policies, standard procedures and decision-making. In order for this to happen, ethical training must take place. Furthermore, there exist arguments which question the impact of the training on ethics on employees and organizations. Will training alone solve ethical issues in organizations? Kavathatzopoulos (2003) argues that employees will need to possess the ability to apply the learned values from the ethical training in order to deal with real life dilemmas and problems in their jobs or professions.

Dolezalek (2003) continue to argue that attention has been given to ethics training but there has been lack of study in ascertaining the actual results of such training. Auditors and ethics consultant tend to solely focus on whether organizations have ethics training program in place, but have less focus on measuring the impact, if any, that these training programs have on the employees’ behaviour and morale. Having in-house an ethics policy, and an enforced business code of conducts alone are also insufficient to effectively address the issue of ethical misconduct. In fact, most of the organizations with such ethical misconduct are large organizations which already have such code of conducts and ethics policy in place. What makes a difference is how much ethics awareness and its enforcement manage to permeate corporate culture as a result of these policies and its training.

Problem Statement

Malaysia’s national oil company, Petroliam Nasional Berhad (PETRONAS) provides 32% of the federal budget in taxes, dividends and royalties (2008) and have paid the government RM 403.3 billion since its inception in 1974. As such, the Oil and Gas industry plays a critical major part of Malaysia’s income and subsequently economic growth. Hence, ethical misconducts especially within the Oil and Gas can potentially expose the industry, but also Malaysia to significant financial risks.

Oil and Gas organizations in Malaysia have already imposed ethics policy and codes of conducts but are not seeing the decrease of reported ethical misconducts. The immediate reactive solution is to merely increase the number of ethical training conducted in hope of arresting the rise of ethical misconducts. However, compliance policy makers fail to address the actual effectiveness of these training, potentially because there are not many studies to measure the effects of such training to the organization’s ethical culture. This research plans to investigate the relationship between Oil and Gas organization’s business ethics training program and its effectiveness in affecting the ethical culture of its employees.

This knowledge area has not seen much research efforts and has received very limited attention in the academic field, despite the serious need for better understanding of the impact of ethical training to industry practitioners. This research will be addressing the problem, as well as questions and objectives to fill the apparent gap of knowledge.

Objectives of the Study

To determine and analyze the frequency requirement of business ethics training program to effectively shape or influence employees’ behaviour and morale in the Malaysian Oil and Gas industry.

To determine and analyze the impact of business ethics training program in the Malaysian Oil and Gas industry and determine the level of influence it has on employees’ behaviour and morale.

To determine and analyze specifically, the motivating factors which influence ethical decision making at work in the Malaysian Oil and Gas industry.

Research Questions / Hypotheses

The research questions are important because these will help the researcher to locate the source of data (Chenail, 2000). The research questions will inadvertently determine the research method in order to satisfy answering the research questions. The literature reviews and this research will objectively answer the research question and its hypotheses.

The main question guiding the research is: What relationship, if any, exists between a Malaysian Oil and Gas business ethics training program and the ethical culture of its employees?

In order to answer the main question, an evaluation educational inquiry was employed to determine the effectiveness of the ethics program and measure the relationship between ethics training program in organizations and the ethical culture of its employees. In focusing on a summative evaluation, the following research hypotheses were developed:

There is / is no significant difference between management and non-management employees with regards to behaviour and morale influences.

There is / is no significant employee opinion on the current frequency and duration of ethics training.

There is / is no significant influence from ethics training on employee ethical behaviour and perceived morale at work.

There is / is no significant difference in ranking of ethical decision making factors at work by employees as a result of the ethics training.

Significance of the Study

The significance of this study from an academic perspective is as follows:

To identify gaps in existing academic and management theories regarding the influence of ethical training on ethical culture in organizations.

To identify the impact of ongoing ethical training programs implemented in organizations and its influence on the ethical culture in organizations.

To identify rooms where ethical training programs can be used to influence ethical behaviour and morale for employees working in Malaysian oil and gas industry.

The significance of this study from an industry perspective is as follows:

To provide a general overview of ethical training programs in the Malaysian oil and gas industry.

To provide a better understanding of the influences of ethical training programs in the Malaysian oil and gas industry.

To identify the importance of ethical training programs in influencing employee behaviour and morale in the Malaysian oil and gas industry.